Verint Announces Q4 and Full Year FY2020 Results

Customers Looking to Verint for Help Navigating the Challenges of COVID-19

MELVILLE, N.Y.–(BUSINESS WIRE)–Verint® Systems Inc. (NASDAQ: VRNT), a global Actionable Intelligence® leader, today announced results for the three months and year ended January 31, 2020 (FY20). Revenue for the three months ended January 31, 2020 was $339 million on a GAAP basis and $349 million on a non-GAAP basis. Diluted EPS for the three months ended January 31, 2020 was $0.07 on a GAAP basis and $1.11 on a non-GAAP basis. Revenue for the year ended January 31, 2020 was $1,304 million on a GAAP basis and $1,336 million on a non-GAAP basis. Diluted EPS for the year ended January 31, 2020 was $0.43 on a GAAP basis and $3.59 on a non-GAAP basis.

“In FY20, we made significant progress with our three strategic objectives and are pleased to report strong execution of our Customer Engagement Cloud First strategy, our Cyber Intelligence Software Model strategy and our plan to separate our two businesses. In the current COVID-19 environment, we are highly engaged with our global base of customers helping them to navigate the new challenges they are facing. Our employees remain fully engaged, working either from home, or from offices that have been authorized to remain open, and we believe our business continuity plan is working well,” said Dan Bodner, CEO.

Customer Engagement FY20 Highlights

Cloud adoption accelerating at large enterprises: Cloud contracts with TCV > $1 million up 93% y-o-y

Strong cloud revenue growth: Cloud revenue up about 45% y-o-y

Strong SaaS bookings growth: New SaaS ACV up more than 70% y-o-y

Recurring revenue: Percentage of software revenue that is recurring increased ~400 bps y-o-y to around 75%

Large project from the Social Security Administration (revenue expected in FY21)

“In Customer Engagement, the market continued its shift to the cloud, with a notable acceleration in large enterprises. We are pleased to report that all key cloud metrics were up significantly in FY20, with cloud revenue up about 45%, new SaaS ACV up more than 70%, and the percentage of software revenue that is recurring up approximately 400 basis points to around 75%. We are also pleased to announce that the Social Security Administration has selected Verint solutions for a large project, consisting of $35 million in perpetual software licenses, plus services and support, to be deployed in several stages. Revenue from this project was previously expected to be partially recognized in our FY20 fourth quarter. The project is being delayed due to appeals and we now expect it to contribute to revenue in FY21. In FY20 (excluding any revenue from this large project), we achieved high-single digit revenue growth on a constant currency basis. Looking ahead, Verint is well positioned for long-term market growth due to our large differentiated portfolio, cloud first go-to-market, and expanding cloud channel partnerships,” Bodner added.

Current COVID-19 Environment for Customer Engagement

Bodner continued, “We are focused on helping our customers navigate their COVID-19 challenges and our solutions support them with the pressing issues they are facing, including the urgent need for advanced analytics, addressing the growth in self-service interactions and managing work from home dynamics. An example is the Centers for Disease Control and Prevention, or CDC, a long-standing Verint customer. The CDC has recently experienced a huge spike in website traffic and we help them to leverage analytics to drive COVID-19 insights. The majority of our customers are large enterprises in financial services, healthcare, utilities, technology and government, where productivity, compliance, and fraud detection remain a high priority.”

“In Cyber Intelligence, advanced data mining software continues to play a critical role in accelerating security investigations and generating actionable insights to fight crime and terror. In FY20, we won many large contracts with an increased software mix, driving a 13% year-over-year increase in gross profit on an estimated fully allocated basis. Our software model transition, which was ahead of plan in FY20, provides our customers faster innovation and software refresh cycles to address security threats that are rapidly becoming more complex with increased data types and volume. Verint is well positioned to help our customers address these evolving threats and sustain growth over the long run,” said Bodner.

Current COVID-19 Environment for Cyber Intelligence

Bodner concluded, “Our customers are responsible for maintaining law and order in times of peace and in times of crisis. We have been asked by governments around the world to address use cases directly related to the current COVID-19 environment, including helping them monitor and enforce quarantines from a centralized control center and scan the internet and social media for signs of increased criminal and terrorism activity in a time of greater uncertainty. With close working relationships with government and commercial organizations in more than 100 counties, we are committed to helping our customers keep the world safe.”

Outlook

Doug Robinson, CFO, added, “Verint has a large customer base of more than 10,000 customers around the world and a very strong and differentiated portfolio. We had a successful FY20 and entered FY21 with a strong outlook. At this point, considering the rapidly changing conditions arising from COVID-19 and uncertainty about its potential impact, we are unable to provide guidance. In the event the global economy deteriorates due to the pandemic, we have a strong balance sheet with $3 billion of assets, including more than $550 million of cash and short-term investments. We believe we are well positioned to navigate the current environment, as we stay focused on supporting our customers and partners during this period.”

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three months and year ended January 31, 2020 and outlook. An online, real-time webcast of the conference call will be available on our website at www.verint.com. The conference call can also be accessed live via telephone at 1-844-309-0615 (United States and Canada) and 1-661-378-9462 (international) and the passcode is 2862907. Please dial in 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see the tables below as well as “Supplemental Information About Non-GAAP Financial Measures and Operating Metrics” at the end of this press release.

About Verint Systems Inc.

Verint® (Nasdaq: VRNT) is a global leader in Actionable Intelligence® solutions with a focus on customer engagement optimization and cyber intelligence. Today, over 10,000 organizations in more than 180 countries—including over 85 percent of the Fortune 100—count on intelligence from Verint solutions to make more informed, effective and timely decisions. Learn more about how we’re creating A Smarter World with Actionable Intelligence® at www.verint.com.

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, political unrest, armed conflicts, natural disasters, or outbreaks of disease, such as the novel coronavirus COVID-19 pandemic, as well as the resulting impact on information technology spending and government budgets, on our business; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization; risks due to aggressive competition in all of our markets, including with respect to maintaining revenues, margins, and sufficient levels of investment in our business and operations; risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets with greater resources than we have; risks associated with our ability to successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments; risks relating to our ability to properly manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources; risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter; risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators and risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain components, products, or services, including companies that may compete with us or work with our competitors; risks associated with the mishandling or perceived mishandling of sensitive or confidential information, including information that may belong to our customers or other third parties, and with security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; risks that our products or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas; risks associated with political factors related to our business or operations, including reputational risks associated with our security solutions and our ability to maintain security clearances where required, as well as risks associated with a significant amount of our business coming from domestic and foreign government customers; risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, relating to our own operations as well as to the use of our solutions by our customers; challenges associated with selling sophisticated solutions, including with respect to assisting customers in understanding and realizing the benefits of our solutions, and developing, offering, implementing, and maintaining a broad and sophisticated solution portfolio; challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, or cancellations during the sales cycle; risk of customer concentration; challenges associated with our ability to accurately forecast when a sales opportunity will convert to an order, or to accurately forecast revenue and expenses; challenges associated with our Customer Engagement segment cloud transition and our Cyber Intelligence segment software model transition, and risk of increased volatility of our operating results from period to period; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks that our customers delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise; risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir, Inc., being unwilling or unable to provide us with certain indemnities to which we are entitled; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders; risks associated with the planned issuance of preferred stock to an affiliate of Apax Partners, including with respect to completion of the transaction and Apax’s resulting significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the planned spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off transaction may not be completed in the expected timeframe or at all, that it does not achieve the benefits anticipated, or that it negatively impacts our operations or stock price, including as a result of management distraction from our business. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, when filed, and other filings we make with the SEC.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, CUSTOMER ENGAGEMENT SOLUTIONS and CYBER INTELLIGENCE SOLUTIONS are trademarks of Verint Systems Inc. or its subsidiaries. Verint and other parties may also have trademark rights in other terms used herein.